The rating agency Icra expects its sample companies to report a 7 to 8 per cent YoY increase in revenues to Rs. 215 billion for FY2024, with an expected recovery in demand conditions and restocking by big retailers from the US market to realign their inventory levels.
The four listed home textile companies in Icra’s sample are Welspun, Trident, Himatsingka, and Indo Count, accounting for about 35 to 40 per cent of India’s domestic textile exports.
The rating agency stated that operating margins are set to improve 250 to 350 bps in FY2024 with expected improvement in revenues from Q2 FY2024 onwards with the festive season.
Kaushik Das, Vice-president and Co-group Head, Corporate Sector Ratings said, “Icra expects home textile exporters to be on a road to recovery, as restocking by big retailers from the US markets has started since Q1 FY2024. Further, as our channel checks indicated, with the festive orders coming in from Q2 FY2024, the order book position is estimated to have improved for home textile exporters.”
Das added that the long-term growth prospects of the sector are encouraging, with the Government of India’s promotional steps (including the proposed FTAs with the UK and the EU, along with the FTA agreement signed with Australia and the UAE) and the longer-term benefit of China Plus One shift in textiles sourcing by big retailers.
India’s home textile exports reported a double-digit decline of 18 per cent and 12 per cent in FY2023 and 4M FY2024, respectively, amid high raw material expenses and energy inflation, coupled with a muted demand scenario in the US and the EU markets.
The US remains the largest market for Indian home textile exports, with a 56 per cent share in FY2023 and a 58 per cent share in 4M FY2024.
Given the high dependence on the US market, the strength in retail sales remains a key demand driver for Indian exporters. The US retail inventory levels for furniture, home furnishing, electronics, and appliance stores have come down from CY2022 levels, with destocking being almost over for the big retailers.
As a result, Icra expects retailers to start buying in the subsequent months to restock their inventory, thereby improving the overall order book position and revenues for FY2024 of the home textile players.
